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Grace [21]
3 years ago
10

Knightmare, Inc., will pay a dividend of $6.15, $9.05, and $12.25 per share for each of the next three years, respectively. The

company will then close its doors. Investors require a return of 11.7 percent on the company's stock. What is the current stock price?
Business
2 answers:
iragen [17]3 years ago
8 0

Answer:

Current Price of Stock $21.55

Explanation:

As Knightmare Inc. will pay dividend for 3 years, we can find the price of stock by discounting(using 11.7% required rate of return) the dividends of 3 year period to get the current value of stock.

Value of stock = 6.15/(1.117) + 9.05(1.117)^2+ 12.25/(1.117)^3

Current Price of Stock = $21.55

iVinArrow [24]3 years ago
4 0

Answer:

The current stock price is $21.54

Explanation:

The current price of the share of Knightmare Inc is the present value of all future cash flows receivable from owning stake in the company.

The future cash flows in this sense are the dividends payable by the company in years 1,2 and 3 which are $6.15,$9.05 and $12.25 per share respectively.

The discount factor in this case is given as 1/(1+r)^N where  r is the required rate of return of 11.7% and the relevant year of dividend receipt,hence the share price is computed thus:

Year   cash flow discount factor               PV

1            $6.15      1/(1+11.7%)^1=0.89525   $5.5

2             $9.05  1/(1+11.7%)^2=0.80148      $7,25

3            $12.25  1/(1+11.7%)^3=0.71753        $8.79

Total present value                                      $21.54

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Calculate the present value of the after tax net returns to land in the 7th year if thereal pre-tax net returns to land today ar
Tatiana [17]

Answer:

PV(after-tax net return in 7th year) = 70.55 (Approx)

Explanation:

Given:

Number of year = 7

Pre-tax net returns (Fn) = $100

Growth rate = 4% = 0.04

Inflation = 3% = 0.03

Marginal tax rate = 30% = 0.3

Discount rate = 10% = 0.1

Computation:

Fn = Fo(1+g)ⁿ = 100(1.04)⁷

Fn = 131.6

Nominal net returns = 131.6(1.03)⁷

Nominal net returns = 161.85

After tax return = 161.85  (1 - 0.3)

After tax return = 113.30

After-tax, risk adjusted discount rate = 0.1(1-0.3) = 7%

PV(after-tax net return in 7th year) = 113.30 (1+0.07)⁻⁷

PV(after-tax net return in 7th year) = 70.55 (Approx)

8 0
2 years ago
The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the followi
Elanso [62]

Answer:

the Cash Received from Customers is $548,400

Explanation:

The computation of the cash amount received by the customers is as follows:

Cash Received from Customers is

= Sales + Decrease in Accounts Receivables

= $516,400 + $32,000

= $548,400

hence, the Cash Received from Customers is $548,400

We simply applied the above formula so that the correct value could come

And, the same is to be considered

7 0
2 years ago
A company purchased a commercial dishwasher by paying cash of $4,200. The dishwasher's fair value on the date of the purchase wa
kogti [31]

Answer:

$4,760

Explanation:

The value a company will record for the dishwasher will be the amount that was used to purchase the dishwasher plus the associated cost of transporting and installing the dishwasher.

The price of the dishwasher to be used is the actual amount it was bought and not the fair value.

Amount recorded for dishwasher= Price + Transportation + Installation fees

Amount recorded for dishwasher= 4,200 + 330 + 230

Amount recorded for dishwasher= $4,760

Note the fee for illegal parking is not considered because it is not a direct cost related to purchase of the dishwasher

5 0
2 years ago
An example of global dependency is when products are produced and used in the same country? True or false
alexandr402 [8]

Hello there,

An example of global dependency is when products are produced and used in the same country?

Answer: False

8 0
3 years ago
An agreement between the owner of a brand and another company or individual who pays a royalty for the use of the brand in assoc
levacccp [35]

Answer:

<u>Licensing.</u>

Explanation:

Brand licensing occurs when there is an agreement between companies to use a brand and its characteristics such as name, logo and image, upon payment of royalts for the use.

It is a strategy that occurs on a large scale worldwide due to the ease of use and the added benefits of using a consolidated brand in the market, which already has an established public, and added value, which generates an economic strengthening in companies that use this strategy. as well as increased reliability and profitability.

7 0
3 years ago
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